Kenya Central Bank Sees Brexit as Worst Risk Facing Economy

  • Britain to vote on June 23 whether to leave the European Union
  • An exit will reverberate across global economy, Njoroge says

No economy in the world will be immune to the volatility that would follow a decision by Britain to exit the European Union, Kenyan central bank Governor Patrick Njoroge said.

East Africa’s biggest economy won’t be spared the “shock waves” that could reverberate around the world should voters in the U.K. decide in a June 23 referendum to withdraw from the economic bloc, Njoroge told reporters Thursday in the capital, Nairobi.

“All I can tell you is that it will be a disaster,” he said. “We are connected to all external markets. If there is any volatility there, it will affect us. We haven’t taken out insurance on volatility, so markets will punish everybody, because there will be nowhere to hide.”

Barring a so-called Brexit, Njoroge said he was more optimistic about the prospects for Kenya’s $61 billion economy, whose biggest exports to Europe are tea and cut flowers. Kenya’s gross domestic product expanded by 5.6 percent in 2015 and the pace should pick up to about 6.1 percent this year, according to Treasury estimates.

The Kenyan economy is more resilient than other African nations because it’s not dependent on a single export such as oil and is also diversified in terms of its trade partners, dealing mainly with its neighbors in the East African Community rather than Europe, Njoroge said.

“The climate is much more positive,” he said. “I can be more optimistic rather than just cautiously optimistic.”

Huge Consequences

British Prime Minister David Cameron is campaigning to keep his country within the EU. The Organization for Economic Cooperation and Development on Wednesday warned about the possible implications of an exit, saying the U.K. faced tighter financial conditions, weaker confidence, higher trade barriers and restrictions on labor mobility.

“Why would the U.K. voters vote for a Brexit? Well, it’s their right,” Njoroge said. Such a decision would “have huge consequences for the rest of the world.”

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